Background Information

The three major types of business ownership are the sole proprietorship, the partnership, and the corporation. There are also other types of business ownership such as cooperative and the franchise.

A sole proprietorship is a business owned by one person. It’s the simplest way of starting a business. You are self-employed and entirely responsible for all aspects of the management of your business. Most are small firms such as grocery stores, restaurants, petrol stations, barber shops, and drugstores.

A partnership is a business owned and managed by a small group, often not more than two or three people, who become partners. By written agreement, these partners share the profits or losses and they are responsible for the debts of the partnership.

A corporation is a business company owned by a number of people and operated under written permission from the state in which it is located. The written permission is called a certificate of incorporation. The corporation acts as a single individual on behalf of its owners. By buying shares of stock, people become owners of corporations. They are then known as stockholders or shareholders. A corporation may have very few owners but most corporations have many owners. Even if you own just one share of a company, you are still one of its owners. Most mining, manufacturing, and transporting of goods, supermarkets, department stores, and other businesses are organized as corporations.

Many large businesses in the UK are public limited companies (plc), which means that the public can buy and sell their shares on the stock exchange. Examples include – Marks & Spencer, British Telecom and the National Westminster Bank. The minimum share capital for a public limited company is £ 50, 000, so many new businesses are likely to take other business forms.

Private Limited Company (UK)

A company can be formed with a minimum of two people becoming its shareholders. They must appoint a director and a company secretary, if the company goes out of business, the responsibility of each shareholder is limited to the amount that they have contributed; they have limited liability. Such a company has Ltd after its name.

In the US, businesses take the same basic forms. However, American companies are registered or incorporated with the authorities in the state where they have their headquarters. The abbreviations Inc and Corp refer to such companies. To sell shares to public they must apply to the Securities Exchange Commission.

VI. Name the type of organization to which the state ments apply:

1.The owner is his or her own boss.

2.Owners agree on how they will divide profits and share losses.

3.Owners allow a board of directors to make dicision about the business.

4.Owners must get written permission from the state in which the business is located before it can operate.

VII. Answer the followig questions:

1.What types of business ownership do you know?

2.What is the simplest way to start a business?

3.What is a partnership?

4.Who is a shareholder?

5.What does the public limited company mean?

VIII. Agree or disagree with the following sentences:

1.A sole propictorship is a business owned by many persons.

2.A partnership is a business owned and managed by a small group who become partners.

3.The owners of corporations are called stockholders.

4.A corporation may not have many owners.

5.If you own just one share of a company you can not be one of its owners.

6.Most mining, manufactoring, supermarkets and department stores, and other business are organized as corporations.

7.Private Limited Company must not appoint a director and a company secretary.

IX. Match the advantages and disadvantages with the three types of ownership in the chart.

Advantages	Types of Ownership	Disadvantages
a) It is easy to start the business.		k) Capital is limited to what the owner can supply or borrow.
b) It is fairly easy to start the business.		l) The partnership ends if a partner quits or dies.
c) More sources of capital are available.	Sole Proprietorship	m) It is difficult and expensive to start the corporation.
d) Specialized managerial skills are available.		n) The life of the business depends upon the owner; it ends if the owner quits or dies.
e) The owner makes all of the decisions and is his or her own boss.		o) Each partner can make decisions; there is more than one boss.
f) The ownership can be easily transferred through sale of stock; the business is not affected by this change of ownership.	Partnership	The owners do not have control of the decisions made each day, unless they are officers of the company.
g) More business skills are available.		q) Long hours and hard work are often necessary.
h) More sources of capital are available.	Corporation	r) Each partner shares the profit.
i)The owner receives all of the profits.		s) The owner is liable (responsible) for all debts, even to losing personal property if the business fails.
j) The owners are liable only up to the amount of their investments.		t) Each partner is liable for business debts made by all partners, even to losing personal property if the business fails.
		u) The business activities of the corporation are limited to those stated in the certificate of incorporation.

X. Work in pairs. Give an oral report about an interview with the owner of a local business. Ask the business owner questions such as these:

1.Why did you choose to go into this kind of business?

2.What risks do you take in operating your own business?

3.What methods do you use to complete with similar business for customers?

4.What training and experience should a person have before attempting to start his own business? Etc.

I. Read the text and write down a list of advantages, disadvantages and responsibilities an entrepreneur has when challenging franchising.